Mortgage and Bankruptcy

[Rich Hupper]

Can someone tell me what happens when a mortgagor files bankruptcy before a foreclosure auction takes place. Is the mortgage wiped out? What generally happens to the property securing the loan?

Thank you

[Wayne Brooks]

No.  Assuming the borrower actually completes the BK, the result is that the borrower no longer has a Personal obligation for the actual debt....the mortgage against the property is not affected in any way. 

Typically, the bank will get a Relief from the Stay of foreclosure in the beginning, and proceed with the foreclosure/auction while and if the borrower is casually completing the BK.

 We’re talking about a first mtg in a Chapter 7......in a 13 a second mtg could possibly be stripped from the property.